Client Bulletin #491

As
we reported on Friday, a three-judge panel of the U.S. Court of
Appeals for the District of Columbia Circuit has struck down the "recess appointments" to the National
Labor Relations Board of Members Sharon Block and Richard Griffin, both
Democrats, and former Member Terence Flynn, a Republican who resigned in 2012.
The three so-called "recess appointees" were named by President Barack Obama on
January 4, 2012, when the Senate was holding short "pro forma" sessions
at least once every three days between December 20, 2011, and January 23, 2012,
to avoid being in recess. The Obama Administration contended the Senate was
effectively in recess beginning December 20, 2011, that the pro forma
sessions meant nothing, and that it had the power to make recess appointments
during this period. The Administration held to this position despite the fact
that the Senate took some substantive actions during the pro forma
sessions, which included votes approving a temporary extension of a payroll tax
provision on December 23, 2011, and commencing a second session of the 112th
Congress on January 3, 2012.

The D.C. Circuit panel held in Noel
Canning v. NLRB that the Senate was indeed in session on January 4, 2012,
and therefore that the President did not have constitutional authority to make
the appointments. The decision, if ultimately binding on the Board after an
expected appeal, will leave the Board with only one "valid" member – Chairman
Mark Gaston Pearce, a Democrat – and also means that all of the Board's
decisions dating back to January 4, 2012, may be void for lack of a
quorum.

The decision also calls into question the
"recess appointment" of Richard Condray to head the Consumer Financial
Protection Bureau, which was made the same day as the NLRB
appointments.

The Court's
Rationale

The Constitution's "Recess Appointments
Clause" gives the President the power "to fill up all Vacancies that may happen
during the Recess." The employer in Noel Canning argued that the
President has recess appointment power (1) only when the Senate is in recess and
(2) only for vacancies that "happen" during the recess. The court found in the
company's favor on both points.

First, on the threshold issue of whether
the Senate was in recess on January 4, the court made a detailed analysis of the
meaning of "recess" as set forth in the Constitution and the way that term had
been used in actual practice since the days of the Founding Fathers. The court
concluded that "recess" as used in the Constitution, meant a recess that
occurred between Senate sessions, or an "intersession" recess. The court then
concluded as a fact that the Senate had officially convened a second session of
the 112th Congress on January 3, 2012. Thus, the court said, there was no
"recess" on January 4, the date of the appointments.

In a particular blow to the Administration
and Board, the court said that the President could not be the one in the
nation's system of laws to decide whether a "recess" exists. According to the
court,

An interpretation … that permits the
President to decide when the Senate is in recess would demolish the checks and
balances inherent in the advice-and-consent requirement, giving the President
free rein to appoint his desired nominees any time he pleases, whether that time
be a weekend, a lunch, or even when the Senate is in session and he is merely
displeased with its inaction. This cannot be the law.

Next, the court addressed the employer's
second argument – that a recess appointment could be made only for a vacancy
that "happened" during "the recess." The court agreed, concluding that, not only
was there no recess on January 4, but also that the vacancies that were filled
on that date had not "happened during" any recess that included January
4, 2012. Accordingly, the court granted Noel Canning's petition for review and
vacated the Board's order in the case.

"Respectful
disagreement"

In reaction to the D.C. Circuit's decision,
Chairman Pearce – now potentially a one-man Board – issued a statement on the
day of the decision, saying in part,

The Board respectfully disagrees with
today's decision and believes that the President's position in the matter will
ultimately be upheld. It should be noted that this order applies to only one
specific case, Noel Canning, and that similar questions have been
raised in more than a dozen cases pending in other courts of appeals.

In the meantime, the Board has important
work to do. The parties who come to us seek and expect careful consideration and
resolution of their cases, and for that reason, we will continue to perform our
statutory duties and issue decisions.

Analysis

If the D.C. Circuit decision stands and is
ultimately applied broadly to all decisions issued by the Board after January 4,
2012, those decisions will presumably be void for lack of the three-member
quorum required under New Process Steel v. NLRB, a 2010 Supreme Court
decision. Many of these Board decisions had a huge negative impact on employers,
and some overruled decades of precedent. As stated above, Chairman Pearce would
be the only remaining member if the decision ultimately results in loss of the
needed quorum. (The only other validly appointed member, Republican Brian Hayes,
left the Board in December 2012, after his term expired.)

Notwithstanding Chairman Pearce's expressed
intent to continue business as usual – pending an expected petition for
rehearing by the full D.C. Circuit en banc or an appeal to the U.S.
Supreme Court – it is not clear how the Board will operate, with only the
Chairman having certain authority and all of its decisions for the past year
(and possibly even into the future) potentially void.

The effect of the Noel Canning
decision could be momentous. Employers with active cases before the Board in any
part of the United States may seek to get their cases before the D.C. Circuit,
with the law of that circuit available to avoid enforcement of Board orders. It
is also possible that employers will proactively seek to enjoin further Board
action on the ground that it does not have a quorum. The decision may also
affect pending compliance proceedings resulting from Board orders (which also
arguably required a quorum to be valid) that have been issued since January 4,
2012, and that were not appealed.

If the Supreme Court gets the case and
upholds the decision on either of the two constitutional grounds relied on by
the D.C. Circuit, then all Board cases decided since January 4, 2012, would
presumably be void for lack of a quorum and would have to be "re-decided" by a
properly-constituted Board with a quorum, as happened after the Supreme Court's New Process Steel decision.

On the other hand, it does not appear that
the Noel Canning decision will affect actions by Lafe Solomon, Acting
General Counsel for the Board, or investigations by Region offices of the Board,
except when Board enforcement is needed, such as in the case of enforcement of a
Board subpoena.

If the "intersession" portion of the D.C.
Circuit's ruling is upheld, it may affect Board decisions and regulations dating
all the way back to 2010. Former Member Craig Becker, a Democrat, was "recess
appointed" on March 27, 2010, but the vacancy that he filled did not "happen"
(occur) between congressional sessions. Precisely which Board decisions are
defective for lack of a quorum may be subject to ongoing dispute.

Conclusion

Facts are a stubborn thing, and there was no
intersession recess of the Senate on January 4, 2012. For years before this
situation arose, Senates under majority control of both parties have kept the
Senate in session to avoid recesses and the recess appointments that might come.
It appears that never before had a President so encroached upon Senate power to
put forward recess appointees simply by unilaterally declaring a recess when no
recess was taken by the Senate itself. Thus, the D.C. Circuit decision attempts
to preserve an important constitutional principle - namely, that the President,
too, is subject to the Constitution and cannot define terms simply as he wants.
The case is far from over, but the D.C. Circuit's decision ultimately may stand
as an important victory for the rule of law.

About Constangy, Brooks
& Smith, LLPConstangy, Brooks & Smith, LLP has
counseled employers on labor and employment law matters, exclusively, since
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